If a Firm Experiences Constant Returns to the Variable Input

question 13

Multiple Choice

If a firm experiences constant returns to the variable input in the short run:

• A)marginal product will be greater than average variable product, but the two will become more equal as output increases.
• B)marginal product will be less than average variable product, but the two will become more equal as output increases.
• C)marginal product will be greater than average variable product, and the difference between the two will become larger as output increases.
• D)marginal product and average variable product will be equal over the range of output in question.

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Definitions:

Non-Price Competition

Strategies used by companies to attract customers based on factors other than price, such as quality, service, and brand loyalty.

Monopolistic Competitor

A firm in a market that sells products that are differentiated from those of competitors, but not to the extent of a monopoly, leading to some degree of market power.

Short Run

A period in economics during which some factors of production or inputs are considered fixed.

Long Run

The long run is a period in economics where all factors of production and costs are variable, allowing companies to adjust all inputs.